San Pablo Bay Pipeline Co. v. Pub. Utilities Comm'n

243 Cal.App.4th 295

196 Cal.Rptr.3d 609

SAN PABLO BAY PIPELINE COMPANY, LLC et al., Petitioners,

v.PUBLIC UTILITIES COMMISSION, Respondent;

Tesoro Refining & Marketing Company et al., Real Parties in Interest.

F069796

Court of Appeal, Fifth District, California.

Filed December 22, 2015

Certified for Partial Publication.^*

Goodin, MacBride, Squeri, Day & Lamprey, James D. Squeri, Megan Somogyi, San Francisco; Munger, Tolles & Olson, Fred A. Rowley, Jr., Los Angeles, and Joshua Patashnik, San Francisco, for Petitioners.

Karen Clopton, Helen W. Yee, Paul Angelopulo and Jonathan C. Koltz, San Francisco, for Respondent.

Manatt, Phelps & Phillips, David L. Huard and Benjamin G. Shatz, San Francisco, for Real Party in Interest Tesoro Refining & Marketing Company.

Orrick, Herrington & Sutcliffe, Joseph M. Malkin and Eric M. Hairston, San Francisco, for Real Party in Interest Chevron Products Company.

Pillsbury WinthropShaw Pittman, Kevin M. Fong and Michael S. Hindus, San Francisco, for Real Party in Interest Valero Marketing and Supply Company.

OPINION

KANE, J.

In San Pablo Bay Pipeline Co. LLC v. Public Utilities Com. (2013) 221 Cal.App.4th 1436, 165 Cal.Rptr.3d 389, this court confirmed a decision of the California Public Utilities Commission (the Commission or PUC) that certain truck racks and storage tanks were part of a pipeline subject to its jurisdiction as a public utility. At the time, we deferred consideration of statute of limitations issues until the Commission filed a final decision on those issues and the related issue of the amount of money to be refunded to shippers that had used the pipeline. (Id. at p. 1442, 165 Cal.Rptr.3d 389.)

The Commission has rendered its decision and petitioner San Pablo Bay Pipeline Company, LLC (Pipeline Company) filed this writ proceeding to challenge the refund of approximately $104.3 million. Pipeline Company contends the refund is too large because the Commission (1) erred in applying the statute of limitations and thus awarded refunds for too long of a period and (2) undervalued the costs Pipeline Company incurred for "line fill" oil used to help transport oil shipments through the pipeline.

The Commission argues that it has the authority to toll the two-year statute of limitations in Public Utilities Code section 735¹ and that section should not be interpreted as an absolute bar to every type of tolling. We conclude that in the peculiar facts of this case, which was processed in a jurisdictional phase followed by a ratemaking and reparations phase, the Commission had the authority to bifurcate the matter into two phases and to conclude the limitations period did not run during the first phase.

As to the Commission's decision to treat line fill as a capital asset valued at its original cost, we conclude Pipeline Company has failed to clearly establish the unreasonableness of the Commission's method of valuation.

Therefore, the Commission's decision is confirmed.

FACTS AND PROCEEDINGS

The Parties

Pipeline Company, a wholly owned subsidiary of Shell Oil Products US, owns and operates the pipeline in question and is the sole petitioner in this writ proceeding. Pipeline Company, as used in this opinion, includes the prior owner of the pipeline and other Shell affiliates.

The Commission is the only respondent. The three real parties in interest are (1) Chevron Products Company (Chevron); (2) Tesoro Refining & Marketing Company (Tesoro); and (3) Valero Marketing and Supply Company (Valero; collectively, "shippers"). The shippers paid Pipeline Company to transport crude oil by pipeline from Chevron's oil production fields to refineries operated by Tesoro and Valero.

The Pipeline

The pipeline is a 20–inch heated crude oil pipeline that runs approximately 265 miles from oil fields in Kern County to the San Francisco Bay Area (SJV Pipeline). SJV Pipeline transports crude oil to (1) the Shell refinery in Martinez, California; (2) the Tesoro Golden Eagle refinery in Martinez, California; and (3) and the Valero refinery in Benicia, California. In 2011, the SJV Pipeline transported an average of 150,000 to 160,000 barrels per 24–hour period of continuous operations (i.e., per stream day). Approximately 50,000 barrels of this amount was delivered to shipper's Bay Area refineries, while the balance was delivered to the Shell refinery in Martinez. Further details regarding SJV Pipeline's characteristics and history are described in San Pablo Bay Pipeline Co. LLC v. Public Utilities Com., supra, 221 Cal.App.4th at pages 1439 to 1440, 165 Cal.Rptr.3d 389 and are not repeated here.

Phase One of Proceedings

Chevron's Complaint

On December 5, 2005, Chevron filed its initial complaint with the Commission. The complaint was designated C.05–12–004. Chevron alleged that (1) the SJV Pipeline had been operated as a public utility since before 2005; (2) effective April 1, 2005, Pipeline Company increased the rates charged on Chevron's shipments from $1.08 to $1.686 per barrel; and (3) Pipeline Company overcharged and discriminated against nonaffiliated shippers in violation of California law.

Chevron alleged that it was obligated contractually to deliver crude oil to Tesoro at the Golden Eagle refinery and to Valero at its Benicia refinery. Chevron alleged that the SJV Pipeline, which is heated, was the only practical way to transport approximately 44,000 barrels per day of San Joaquin Valley heavy crude needed to meet its contractual obligations with Tesoro and Valero. This lack of practical alternatives meant that Pipeline Company was in a position to impose monopoly prices for the transportation services provided by the SJV Pipeline.

Chevron's complaint asked the Commission (1) to declare that the SJV Pipeline was a public utility subject to the Commission's jurisdiction and (2) to find that Pipeline Company had violated the Public Utilities Code by (a) failing to file tariffs for its pipeline services, (b) discriminating between its affiliates and other shippers in the rates charged, (c) charging unreasonable rates to nonaffiliated shippers, and (d) illegally changing its rates. Chevron's request for relief also asked the Commission to determine just and reasonable rates effective April 1, 2005, and to order Pipeline Company "to refund to Chevron the difference between the rates paid by Chevron from April 1, 2005 and the reasonable rates determined by the Commission."

Tesoro's Intervention

On December 13, 2005, Tesoro filed a petition to intervene in case C.05–12–004. Tesoro's petition alleged that it was dependent upon the SJV Pipeline because it was the only heated crude oil line from Bakersfield to its Golden Eagle refinery at Martinez and the only pipeline that could efficiently ship heavy viscous San Joaquin crude oil. Tesoro also alleged it had a substantial interest in the remedies sought by Chevron as the impact of the Pipeline Company's charges fell on it because the amount Tesoro paid to Chevron for the crude oil included those transportation charges. Tesoro supported the relief sought by Chevron and stated it did "not seek a broadening of the issues presented in the Complaint."

The addition of Tesoro to the proceeding did not change the volume of oil for which a refund was sought and Pipeline Company did not oppose Tesoro's petition to intervene. Consequently, the Commission granted Tesoro's request to intervene.

Prehearing Procedures

In March 2006, after a prehearing conference, the Commission bifurcated the proceeding, with the first phase limited to whether the SJV Pipeline was a public utility subject to the Commission's jurisdiction and the second phase, if necessary, to address all ratemaking and remedies. The scoping memo and ruling that established the two phases did not specify the precise procedural steps that would be used if a second phase was necessary.

Subsequently, the parties filed various motions designed to resolve the first phase of the proceeding. Pipeline Company filed a motion to dismiss and both sides filed motions for summary adjudication.

2007 Decision

In July 2007, the Commission resolved the pending motions by issuing Decision 07–07–040. The Commission denied Pipeline Company's motions and granted Chevron's motion for summary adjudication, concluding that the SJV Pipeline had been dedicated to public service and, thus, was subject to regulation by the Commission. The Commission also concluded that "this proceeding should be closed, effectively immediately." This conclusion may explain what was intended by the March 2006 scoping memo and ruling when it bifurcated the proceeding.

Pipeline Company requested a rehearing and, in response, the Commission issued Decision 07–12–021, which modified its prior decision. Among other things, Decision 07–12–021 expanded the earlier order by including a paragraph that directed Pipeline Company "to file tariffs for its third party contracts." The new decision also stated, "This proceeding, Case (C.) 05–12–004, is closed."

Judicial Review of 2007 Decision

Pipeline Company's attempts to have the decision, as modified, overturned in court were unsuccessful. The Second Appellate District of the Court of Appeal denied its petition for writ of review in June 2008 and, two months later, the California Supreme Court denied a petition for review. Consequently, the Commission's decision that the SJV Pipeline had been dedicated to public use and its order directing Pipeline Company to file a tariff became a final decision no longer subject to challenge in administrative or judicial proceedings.

Phase Two of Proceedings

New Pleadings—Complaint and Tariff Application

On March 26, 2008, well before Pipeline Company's judicial challenges to the Commission's modified decision were rejected by the California Supreme Court in August 2008, Chevron initiated the second phase of the proceedings by filing another complaint with the Commission, Case C.08–03–021.

Chevron's complaint alleged the Commission's modified decision held Pipeline Company was operating the SJV Pipeline as a...